Unusual Oversupply of Distillates Stocks Redux

June 4, 2020

As we have discussed before, but need to restate, the stocks, or inventories, of Distillates Fuels (diesel fuel, jet fuel, heating oil) are unusually oversupplied for this time of the year.  The dramatic decrease in jet fuel demand as well as reduced demand of diesel fuel for manufacturing have contributed to the oversupply.  Heating Oil futures prices have increased in tandem with Crude Oil prices, but slower, so the crack spreads have been pressured downward, as shown in the second chart below.  A trader may consider shorting a heating oil crack spread in the deferred months.

The chart below can be constructed in the Fundamental Analytics platform under Fundamentals > Distillates Fuel Oil > Stocks.

Total Distillates Stocks

Latest Data as of Friday, May 29, 2020

The chart below can be constructed in the Fundamental Analytics platform under Prices > Instruments and Spreads > Heating Oil.

July Heating Crack Spread

Latest Data as of Wednesday, June 3, 2020

$7.42


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The Fundamental Analytics Team

The information provided here is for general informational purposes only and should not be considered individualized investment advice. All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

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